Sectors: Generating Ideas NMI, February 2017

Sectors: Generating Ideas NMI, March 2017

  1. Introduction

    Just like I did with the PMI (here) I’m going to use the ISN NMI report to drill down in order to find out which sectors might be more interesting. The goal is to strat filtering out those sectors that are not really interesting and finding those that actually look very good.

    In order to accomplish that we will go through February’s 2017 ISM NMI report, paying special attention to the industry commentaries and how well did each sector report.

  2. Industry Commentaries

    There are 3 industries that made interesting and positive comments.

    “Lending has picked up quite nicely” (Finance & Insurance)
    “Strong 1st quarter for our industry shows promise for 2017.” (Mining)
    “The dramatic improvement in business, which began in December continued into January. Early February is showing similar results.” (Wholesale Trade)

    Finance comment is not that positive, however, the fact that is a cyclical industry in a now bullish economy makes it interesting. Mining is also very interesting, after going through a very bad time is now recuperating, there could be very interesting companies trending into higher levels.

    Finally, Wholesale Trade commentary is very exciting. It’s actually talking about a DRAMATIC improvement that has been going on for some months now. This is very interesting material to work on.

  3. Inside the NMI

    Going through NMI, Business activity and New Orders for each sector we find some very interesting information. The first thing that I noticed is that Wholesale Trade is actually not doing that good in the data so we might want to discard that sector for now.

    In the other hand, Mining outperforms nearly all other sectors on everything. This is very positive and means that is worth to dig deeper into the sector. Finance is also doing quite well, so I’ll also keep that sector as a possibility.

    There are another 3 sectors that look interesting once you go through the data. This is Agriculture, Forestry, Fishing & Hunting; Utilities and Managment of companies & Support Services.

    The last one makes a lot of sense, it’s quite a cyclical sector, if the economy is boosting then there will be lots of demand for Company management and support services. Utilities is NOT a cyclical sector so it might not outperform but it might generate opportunities to make some good money on lower risk. Finally, I’ll discard Agriculture, etc. Because I know nothing about it, so I’d rather not go into it.

  4. Conclusion

    Right now most of the sectors look positive, and there are not any that look clearly negative. But in my opinion, according to this data, there are 4 sectors that look more interesting than the rest. These are:
    -Minning: Good commentary, very good data, cyclical.
    -Finance: Good commentary, good data, cyclical.
    – Management of Companies & Technical Services: Very good data, cyclical.
    -Utilities: Very good data but defensive. Still interesting trade possibilities.

Nuño Pérez del Barrio
Twitter: @nuopb

Note*: You can find the full ISM NMI report HERE.

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